# Dynamic Models: Lagged DV + Demographics

| Model | Dep Var | N | Countries | R² |
|---|---|---|---|---|
| D1: dynamic rating | rating_numeric | 1,994 | 79 | 0.964 |
| D2: dynamic spread | sovereign_spread | 721 | 23 | 0.809 |
| D3: Z → Δrating | rating_change | 1,994 | 79 | 0.024 |
| D4: Z → P(downgrade) | downgrade_any | 4,921 | 176 | 0.016 |

## Key Coefficients

| Model | Variable | Coef | SE | p-value | Sig |
|---|---|---|---|---|---|
| D1: dynamic rating | rating_lag | 0.9651 | 0.0058 | 0.0000 | *** |
| D1: dynamic rating | Z_1 | 0.0756 | 1.0108 | 0.9403 |  |
| D1: dynamic rating | Z_2 | -0.0168 | 0.1466 | 0.9087 |  |
| D1: dynamic rating | Z_3 | 0.0012 | 0.0058 | 0.8434 |  |
| D1: dynamic rating | govt_debt_gdp | -0.0013 | 0.0007 | 0.0560 | * |
| D2: dynamic spread | sovereign_spread_lag | 0.7272 | 0.0239 | 0.0000 | *** |
| D2: dynamic spread | Z_1 | 6.7363 | 3.8214 | 0.0784 | * |
| D2: dynamic spread | Z_2 | -0.9181 | 0.5024 | 0.0681 | * |
| D2: dynamic spread | Z_3 | 0.0333 | 0.0185 | 0.0713 | * |
| D3: Z → Δrating | Z_1 | -0.1363 | 1.0100 | 0.8927 |  |
| D3: Z → Δrating | Z_2 | -0.0025 | 0.1465 | 0.9862 |  |
| D3: Z → Δrating | Z_3 | 0.0008 | 0.0058 | 0.8972 |  |
| D3: Z → Δrating | govt_debt_gdp | -0.0003 | 0.0006 | 0.6143 |  |
| D4: Z → P(downgrade) | Z_1 | 0.0520 | 0.0703 | 0.4598 |  |
| D4: Z → P(downgrade) | Z_2 | -0.0059 | 0.0105 | 0.5758 |  |
| D4: Z → P(downgrade) | Z_3 | 0.0002 | 0.0004 | 0.6305 |  |
| D4: Z → P(downgrade) | govt_debt_gdp | 0.0001 | 0.0000 | 0.0023 | *** |

*Dynamic models with lagged dependent variable*